Glendale Federal Awarded Damages in Supervisory Goodwill Suit Vs. U.S. Government
SAN FRANCISCO--(BUSINESS WIRE)--April 9, 1999-- Award Totals $908.948 Million
Golden State Bancorp Inc. (NYSE: GSB) announced today that the United States Court of Federal Claims in Washington, D.C. has ruled, as part of Glendale Federal Bank's long-standing supervisory goodwill litigation, that the U.S. government must compensate that bank for a breach of contract.
Golden State Bancorp is the parent of California Federal Bank, which is the successor by merger to Glendale Federal.
Chief Judge Loren A. Smith's decision states that Glendale Federal is entitled to $908.948 million as restitution and non-overlapping reliance damages. The ruling denies recovery under Glendale Federal's lost profits/expectation damages claims. The Company noted that the ruling covers years of complex litigation and requires a thorough analysis before its implications can be fully assessed. A definitive response to the ruling must await that analysis.
Stephen J. Trafton, Executive Vice President of Golden State Bancorp and formerly Chief Executive Officer of Glendale Federal, said: "This was an important victory in a long and arduous battle, but we continue to be focused on the possibility of additional battles ahead. Regardless, even at first glance, it's clear that the ruling underscores the fact that the federal government must respect the sanctity of a contract. People must honor their agreements. The government, far from being an exception to this rule, should champion it, since our country's prosperity is founded on the idea of enforceable contracts. That's what this case is all about."
Glendale Federal initiated its lawsuit against the federal government in 1990 for breach of contract and certain other claims. The bank won an initial decision in the U.S. Court of Federal Claims in 1992, establishing the government's liability for breach of contract. This ruling was later affirmed by the U.S. Court of Appeals for the Federal Circuit sitting en banc in a 9-2 vote. In July 1996, the U.S. Supreme Court agreed, in a 7-2 vote, that the federal government had breached its contract with Glendale Federal. The current ruling by Chief Judge Smith concludes a trial which began in the Court of Federal Claims in February 1997 to determine the amount of compensation to which Glendale Federal is entitled as a result of that breach of contract.
On May 7, 1998 Golden State Bancorp issued Litigation Tracking Warrants(TM) (NASDAQ: GSBNZ) to its shareholders, which allow warrant holders to receive GSB common stock equal to 85% of the final damage award paid, net of expenses and taxes.
San Francisco-based Golden State Bancorp, with $55 billion in assets, is the publicly-traded parent company of California Federal Bank (Cal Fed). Cal Fed is the second-largest savings and loan in the U.S. in terms of assets, with more than 350 retail deposit branches in California and Nevada. |
